High-Risk Merchant Account

Looking for ways to complement your lineup of payment options for European customers, you must face many different types of payment services and products that would become a catalyst for significant business success. While one would like to start off with a well-serviced merchant account, European merchant acquiring banks and every merchant account service provider may not be all too eager to take a merchant of your ilk, given the high risks endemic to the nature of your business.

Don’t worry, you are at the right place, because high-risk businesses have a greater chance to get a merchant account in Europe compared to non-European countries, and our team will be more than happy to support you on this journey.

So for now, keep reading to discover what makes a merchant high-risk, which merchant account service providers are ready and able to provide and support a high-risk merchant account, and how to open one.

The service providers of a merchant account and merchant acquiring banks regularly estimate the level of risk for new and current merchants. If your enterprise presently falls into the category of high-risk merchants, then you have to know that in the future, the status of risk can change if the nature of your business has changed, say it expanded, and it starts accepting international payments.

Where the risk increases, one can be obliged to take proper action, such as setting a reserve of funds or supplying additional information. The merchant account may be closed when a provider does not cater to high-risk merchants, or when the risk connected with an enterprise is too high.

What Is a High-Risk Merchant

A high-risk merchant account is that which the merchant account service provider and the merchant acquiring bank feel as a high risk due to either the company’s payment history or nature of business activities that may result in financial losses. Each bank and provider bases its assessment on its own set of criteria to evaluate the risk level, though many of those criteria are standard.

The following are the usual factors related to company records that define whether a business is high-risk:

• Merchants without payment processing history are normally categorized as high-risk since there is no track record to prove otherwise.
• Cross-border activity can increase a merchant’s risk exposure, depending on the countries, customers and transactions involved. The EU identifies high-risk third countries because of strategic deficiencies in their anti-money laundering and counter-terrorist financing frameworks, rather than through a general fraud ranking. This classification must be distinguished from an acquirer’s commercial assessment of a merchant’s processing risk.
• Large volumes of payments above certain thresholds (threshold differs from provider to provider).
• Repeated chargebacks, meaning consumer payments that are reversed by banks, in the process, results in loss of revenue and hence affects the company’s reliability.
• Large number of returns/cancellations.
• Low business credit score.
• Multi-currency transactions.

Apart from company records, certain industries are considered high-risk as far as susceptibility to fraud, chargebacks and returns go. That is, a merchant may prove a flawless transaction history, but the industry they belong to can still notch them in the list of high-risk merchants.

For one reason or another, the following industries and services are considered high-risk:

• Debt collection
• E-Commerce
• Travel
• Pawnshops
• Furniture and electronic stores
• Gambling
• Online dating
• MLM marketing
• SEO services
• CBD products
• E-cigarette and vape shops
• Adult industry
• Subscription services
• Recurring payment plan services

Classification as a high-risk merchant does not, by itself, result in a Mastercard MATCH Pro listing. MATCH Pro records certain terminated merchant relationships reported under Mastercard’s specified listing criteria. Acquirers use this information when assessing new applications. A listing can materially affect onboarding and must be distinguished from an ordinary high-risk classification.

High-Risk Merchant Account Providers in Europe

Within
Europe
, a lot of well-known banks and merchant account providers provide all possible and impossible services to high-risk merchants. Not each of them, though, will be ready to accept each and every industry type, which may turn out a good reason for you to get a closer look at every reputable provider’s history of rejections of businesses operating within certain industries that can disrupt business operations.

The following merchant account providers are most likely to help you open and service a high-risk merchant account for you:

• International Bank Services (IBS) – UK-based but offers merchant accounts in various European countries to gaming, pharmaceuticals casinos, and other industries.
• PayPal – acceptance depends on the merchant’s activities, jurisdiction and compliance with PayPal’s Acceptable Use Policy. Certain activities, including gambling, cryptocurrency services, prescription-item sales and online dating, require prior approval. Other activities are prohibited. Opening a standard PayPal Business account does not authorise a merchant to process payments for restricted activities.
• IPAYTOTAL LTD, the UK company registered under number 11357725, was dissolved on 19 November 2023 following liquidation. It must not be presented as an active UK provider accepting new merchant-account applications.
• European Merchant Accounts – Latvia and Italy-based provider specializing in credit card payments set-up and servicing for such sectors as digital financial services, online gambling, startups, online alcohol stores, and others.
• SecurionPay: Switzerland-based provider that has specialized in online payments for subscription-based billing models, forex, dating, etc., companies.
• MerchantScout: It is UK-based and has specialized in insurance, pharmacy, financial services, jewelry, working with banks within Western Europe to service the whole EU region.

Searching for a high-risk merchant account provider, pay attention to the following aspects:

• Licenses – the provider must be permitted to work in the countries where your company is supposed to operate.
• Pricing model – preferably no hidden fees, the published fees are reasonable. They are not publicly available in most cases since the prices for high-risk merchants are custom-made and communicated individually.
• Understanding of your area of business – preferable experience within your industry and countries of operation, knowing relevant legal requirements.
• Onboarding and payments software – up-to-date, easy-to-use, customizable, flexible, supporting a lot of payment set-ups, e.g. your selected type of payment gateways.
• Flexibility – ideally, negotiable pricing, terms, and conditions and features of the payment products and services.
• Security and compliance – guaranteed secure payments – compliance with payment services regulations, fraud prevention policy and software.
• Customer support – knowledgeable, responsive, and willing to go the extra mile when your business is up against some challenge.

How to Choose a High-Risk Merchant Account Provider:

Define your business needs and payments preferred by your customers

Make sure your business credit score is acceptable (if needed, find ways to improve it prior to submitting an application)

Research and compare merchant account service providers and merchant acquiring banks to ensure they’re likely to meet your business needs

Eliminate all the providers that might not be licensed in the region or country you’re working in as compliance is of paramount importance

Shortlist only the providers familiar with the area of your business and are most likely to accept your products and services and the level of inherent risks

Make sure you’re prepared to meet all the requirements and pay higher fees specified by the selected providers

Requirements of High-Risk Businesses

Before applying for a high-risk merchant account, you need to consider specific criteria, prepare the required documents, and submit a general application, which is usually found on the website of your provider.

Typically, to open a merchant account, you need to prove the following, which is considered ideal:

• Good credit score
• Flawless history of transactions
• No history of bankruptcy
• No blacklisted previous merchant accounts
• Low level of vulnerability to fraud in payment

Unless your business meets such criteria, it will likely fall under the category of a high-risk merchant.

Your eligibility in respect of all of the above aspects will be checked based on the following documents:

• Incorporation document or equivalent
• Shareholders certificate
• Tax returns document
• A copy of a business license – in case when your business is licensable
• A description of products or services sold by a company, including marketing material
• Billing, shipping and returns policy
• Proof of the registered address
• Corporate bank account details, including bank statements from the previous few months
• Your company’s payment processing history
• Financial statements (3-6 previous months)
• Proof of identity of the signatory of the account as well as shareholders and directors

How to Open a High-Risk Merchant Account in Europe

To open a high-risk merchant account, you’ll first have to go through the regular merchant account opening process where the level of risk will be assessed, and your business will be categorised accordingly. Providers often use
AI-powered
decision-making tools to assess applications, which makes their decisions as fair and as accurate as possible.

You may want to apply through a high-risk merchant account provider or directly to a merchant acquiring bank. Depending on the complexity of your business, it might take a month or longer to get a new high-risk merchant account opened, which is really lengthier in comparison to the low-risk merchant accounts.

Opening a high-risk merchant account:

• Apply for either a merchant account service provider or a merchant acquiring bank, who specialize in high-risk merchants. Preferably those who have experience with companies in your industry will know exactly what’s expected of you better. Carefully read through the requirements as these vary from one service provider to another.
• Fill out an application for a merchant account and deliver, with required documents, to either a merchant account service provider or directly to or a merchant acquiring bank.
• When applying for a high-risk merchant account, be prepared for heavy scrutiny and furnish additional information, if required, at the time of underwriting. Once the application is processed, a merchant account service provider categorizes the business as low-risk or high-risk based upon their respective criteria.
• In case the application was through some merchant account service provider, in the case of success, he finds you a bank that will agree to open a high-risk merchant account for you. The merchant acquiring bank approves your application. You get a contract for your new account. You’re finally onboarded by the merchant acquiring bank.

Conditions Applied to High-Risk Merchants

After your application for a high-risk merchant account in Europe gets approved, you will have to conduct business within specific conditions as stated by your acquiring bank. This typically implies less leeway and much more accountability.

• High-risk merchants are usually required to:
  • Pay higher setup, processing and chargeback fees, along with other fees as decided upon by the merchant acquiring banks along with the other payment service providers.
  • Sign longer contracts with more terms and conditions.
  • Have periodic transaction volume limits, i.e., a certain amount of transactions may be allowed in a certain period of time.
  • One of the following cash reserves for verification of the transactions safely by a merchant account service provider:
    • Rolling reserve: The payment processor withholds an agreed percentage of processed sales for a specified holding period before releasing the funds under the contract. There is no universal 10% maximum: the percentage can exceed 10% and depends on the provider’s risk assessment and contractual terms.
    • Capped reserve: The payment processor withholds an agreed-upon percentage of every completed transaction until such time as the total of those withheld funds reach a pre-established level.
    • Upfront reserve: A fixed amount of collateral required by the payment provider, funded by the merchant or withheld from available funds or initial settlements. It secures potential payment liabilities and is released according to the contract. Establishing this reserve does not automatically release all previously processed payments.
  • Additional technological requirements to maintain adherence to relevant regulations.

Setting up a high-risk merchant account in Europe does indeed involve quite a lot of work due to the nature of the risks involved. The good news, though, is that our team here at Regulated United Europe is very well-prepared to do this efficiently. With eight years of experience in opening high-risk merchant accounts all over Europe, we assist clients skillfully. By engaging the services of an extensive network of trusted partners in the European financial services industry, we develop appropriate and cost-effective solutions that will enhance the functioning of the companies we serve. Book a personal consultation now and begin your business growth in Europe.